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Opposition says Newfoundland and Labrador government offered to buy equity stake in Terra Nova

ST. JOHN’S, N.L. — Briefing notes obtained by the Official Opposition through an access to information request show the provincial government appears to have gone against its own advice in negotiations with Suncor Energy and its partners in the Terra Nova project by offering to take up to a 15 per cent equity stake in the project to keep it in operation, the Progressive Conservatives say.

One of the recommendations in the Premier’s Economic Recovery Team (PERT) report, as a way to raise capital to tackle the province’s dire fiscal situation, is to sell the provincial government’s oil and gas equity interests when oil prices increase.

Lloyd Parrott, PC industry, energy and technology critic — while he said he supports looking at every option available to come to a deal to extend the life of the project — asked the government on Tuesday about its contradictory approach.

“It raises a lot of questions,” Parrott said. “It is a very important project to the province’s future, and to … the men and women sitting home who are unemployed right now.

“My district borders the Bull Arm site and I have a lot of people who work in offshore oil and gas, and if you look to the Bull Arm site, we’ve got a glorified Walmart parking lot out there with rigs sitting doing nothing. It’s crucial right now. We need to get men and women back to work. Now is the time, not only to be investing in our oil and gas, but in our men and women. I believe we should be looking at every option available to make it happen.”

In January, the provincial government announced that a non-binding memorandum of understanding (MOU) had been reached with the project owners — Suncor Energy at 37.675 per cent (operator); ExxonMobil, 19 per cent; Equinor, 15 per cent; Husky Energy, 13 per cent; Murphy Oil, 10.475 per cent; Mosbacher Operating, 3.85 per cent; and Chevron Canada, one per cent. The province also committed up to $175 million on a matching contribution basis and possibly modifying the royalty regime should an agreement be reached to extend the life of the project.

However, negotiations have failed so far to reach an agreement, and Suncor and its partners have set a June 15 deadline for a deal to be reached.

Andrew Parsons, Minister of Industry, Energy and Technology, would not confirm an equity stake had been offered.

“What I can say is this has been a very long-standing negotiation, a long-standing process, and there’s been a lot of information going back and forth,” he said. “My biggest thing is I don’t want to negotiate in public. I don’t want to be seen as negotiating something of this magnitude in the House of Assembly during question period. The reality is that Suncor, themselves, has come out and set a deadline in place, June 15.

“I do feel comfortable saying that the province, when it’s all said and done, will be shown to have done what we can. Hopefully, this ends positively. But when it’s done, I will be comfortable in saying the province has done what we can to make this successful.”

The Newfoundland and Labrador Oil and Gas Industries Association (Noia) has raised concerns about the deadline and whether the Terra Nova floating production, storage and offloading (FPSO) vessel is to continue with its work in the offshore or remain idle.

Noia has stated that approximately 1,000 direct jobs will be affected, and thousands more in the service and supply sector through the use of helicopters, supply vessels, environmental monitoring, catering, maintenance, health, safety and medical services, and human resources.

The project, if a deal can be reached by June 15, would extend the working life of the Terra Nova FPSO to 2031 and allow the vessel to capture another 80 million barrels of oil.

Decreasing demand for oil, low oil prices and the COVID-19 pandemic have played havoc with the oil and gas industry worldwide. There are some signs that it is starting to bounce back.

Suncor Energy operates the Terra Nova field, which is located offshore approximately 350 kilometres southeast of the island of Newfoundland. Discovered in 1984, the oilfield was the second to be developed on the Grand Banks in Newfoundland’s offshore.

Production from the field began in 2002, using the FPSO vessel, which is 292.2 metres long and 45.5 metres wide — approximately the size of three football fields laid end to end — and from the keel to the helideck stands more than 18 stories high.

Source: Saltwire | This text was excerpted from the media outlet cited on June 1, 2021 and is provided to Noia members for information purposes only. Any opinion expressed therein is neither attributable to nor endorsed by Noia.